Talk:FairTax/Archive 1

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(10-June-05) The GOP has their own website

Can they put it there instead of wasting wiki-space?

It's a real proposal, with a real following, proposing massive, radical changes to the tax system. It can be made encyclopedic if there are enough editors around. However, since there are 600k activists pushing this issue, I don't think this article will ever lose the NPOV tag since the anonymous editors who hit this daily don't seem at all concerned with NPOV or neutral tone of voice. --Unfocused 14:30, 10 Jun 2005 (UTC)

(12-June-05) Proposal to Rename

I'd like to rename this to something like "United States Fair Tax Movement". We need to identify that this is a movement in a specific country. Labeling it a movement also removes a lot of POV issues- since a movement is free to define its own name, we don't have to delve into whether or not it's a fair proposal. Any objections? Feco 21:04, 25 May 2005 (UTC)

Also, I'm pretty sure CamelCase is a no-no for article names in wiki. Feco 21:05, 25 May 2005 (UTC)

CamelCase is fine for articles that are properly named by CamelCase. It's a no-no for new articles where the [[bracket syntax]] better expresses the idea that is being written about. Since this article is about a very specific piece of legislation, I would only support a move to the more formal name; however, I prefer the common name as the article title, and the formal congressional name as a redirect, since average readers will look for the common name. --Unfocused 00:52, 26 May 2005 (UTC)

I disagree with renaming this piece. Wikipedia is an encyclopedia, which means that an entry under a name should simply describe and define that name. FairTax is the actual name of an authentic grass roots tax movement in the US, lead by Americans for Fair Taxation and 600,000+ American taxpayers.

The description of FairTax is not entirely correct. The article says, for example, "It is essentially a national sales tax that includes a fixed monthly exemption." That is incorrect. There are no exemptions in the FairTax proposal. FairTax provides a monthly rebate to assure that no one pays tax up to the poverty level, but it is a rebate, not an exemption.

Also, the most important thing about FairTax is that it repeals the present income tax system. It is a consumption tax that assures that everyone, even tax evaders (who, according to the IRS, costs the US $350 BILLION a year -- and every individual taxpayer an extra $2,000 annually), illegal immigrants, drug and porn dealers and 40 million foreign tourists a year would pay into the system.

Yes, the article needs to be totally rewritten because it does not properly describe the FairTax.

An article in an encyclopedia, however, is supposed to be an accurate description of what the subject is. The piece on FairTax is not an accurate description of the proposal.AmericanWriter

The FairTax proposal is simply a national sales tax with a monthly exemption. The part of the proposal that exempts spending up to the national poverty level by "prebate" is an exemption, and nothing more. Beyond that, it is a sales tax. It's dressed up in fancy language by its supporters, but the fact remains, it's a tax on sales, otherwise, if it were a true consumption tax, it would be applied to every tree harvested from national forests by agribusiness, every barrel of oil extracted from the ground, and every resource consumed, not just retail sales. This is a sales tax proposal.

An article in an encyclopedia looks at both the good parts and the bad parts of every subject. The legislation itself is the description of what is proposed. An encyclopedia article explains the significance of the subject, including the advantages and drawbacks. Encyclopedia articles are not one sided propaganda pieces.

If you believe the description is inaccurate, then correct it. But the counterpoints and the opposing view description of the proposal belongs there just as much as the proponent view, so please take care not to push a single, supportive POV on an article that is clearly a radical proposal. Unfocused 03:34, 7 Jun 2005 (UTC)

Hey, this talk of taxing tourists and illegal aliens ... couldn't help thinking of something that someone once said... hmmm, what was it?... "no taxation without representation". Anyone for tea? Grace Note 01:40, 9 Jun 2005 (UTC)

AmericanWriter- I agree with the idea of renaming to something like "FairTax Movement" or "Unites States FairTax Act." I believe the latter is the official legislative name of the H and S bills. If you believe there are factual inaccuracies, then make the corrections. If you plan to make wholesale changes, it's probably better to propose them on the talk page first. Feco 08:30, 12 Jun 2005 (UTC)

(23-June-05) Non-neutral Point-of-View

This really needs well-written arguments in opposition to the FairTax. Pakaran 13:13, 16 May 2005 (UTC)

I agree with the above. Also directing National sales tax here to this FairTax article is POV. Either there needs to be a separate article about various national sales tax proposals or the article should be renamed National sales tax and have the contents of this article merge with content discussing national sales tax proposals in general with pro and con arguments included. --68.167.204.62 14:13, 19 May 2005 (UTC)

Editors should be aware that Fair Tax America, an apparently popular blog supporting the FairTax, is linking to this article from their front page. There may be an influx of biased editors, some of whom may not understand our policies. Pakaran 17:07, 19 May 2005 (UTC)

Agree with above, linking national sales tax (which is usually called "national retail sales tax", or NRST) is extremely biased.

This article needs a lot of work. Besides being incomplete, portions are very biased (especially the third paragraph under "Proposed changes to the tax system", and most of the references are biased editorials--not exactly a good, impartial source of data. Bkhouser 13:51, 26 May 2005 (UTC)

Please suggest alternatives. The Brookings Institute is an independent policy think tank, with better credentials than the average editorial whether you agree with them or not. A proposed piece of legislation isn't going to get much better sources than:

1. The bill itself.
2. The view and analysis from the supporters.
3. The view and analysis from the opposition.

In this situation, individual paragraphs will always be biased, but can be improved. Both sides of this specific issue will always seem extreme, because the scale and scope of the changes proposed are extreme. For example, the first paragraph of each of the first four sections also contains a clear pro-FairTax bias. Even the common name adopted by the bill's authors is a POV issue.

I don't see any way to completely eliminate bias. The only thing I can do is record, as accurately as possible, the changes proposed, and the expected results from supporters and the opposition, with rebuttals from each, where available. If the supporters expect the only result of a bill would be to turn the sky a pleasant hue of green, yet the opposition expects a rain of fire, rivers of blood, plague, pestilence, a thousand years of war, and the four horsemen of the apocolypse to come riding down from the sky, then the nearest to fair treatment is to report all of the plausible results from both sides, with the best rebuttals of the same, leaving out straw man arguments from both sides.

Unfortunately, there are about four or five additional sections to add regarding the expected negative effects of this proposal, so I expect you'll find the article even more biased then. But I'll also post rebuttals I find.

If you find the third paragraph of the "Proposed changes to the tax system" section biased, then I think the action to take is to cite the plausible rebuttals of the FairTax supporters. --Unfocused 15:16, 26 May 2005 (UTC)

I agree that probably the best we can do is to provide both sides of each issue however biased they may be. We need to strive to find a counter argument for each point to get all the points of view. Things started out pretty well, I thought, because the tone tended to be "proponents say this" followed by "critics say this". But the third paragraph of the "Proposed changes" section bothered me because it was stated as simple fact when in fact, it isn't necessarily. While the Brookings Institute may generally be a respectable source of opinion, William Gale provided no supporting calculations or statistics to back up his claim about how regressive the FairTax is. Bkhouser 19:47, 26 May 2005 (UTC)

What part do you dispute is not simple fact, the progressive/regressive tax portion, or the direct quote from William Gale? The first portion is simple fact, and the direct quote is just that, a direct quote. Perhaps breaking them into two paragraphs? However, the Gale quote is about how a switch from a progressive tax system to a regressive tax system would shift the balance of taxation, so it sort of belongs where it is.

I'm not sure what you have in mind. I don't think a point by point "he said/she said" is necessarily more fair than a full review of the viewpoint of each side, regardless of whether one ends up larger than the other.

Please , I encourage you to make some edits and we'll work it out. --Unfocused 00:15, 27 May 2005 (UTC)

I don't understand how this article is bias in favor of the fairtax, to me it seems to be a very critical and extreamly confusing. At one point it says Underground industries are estimade to be worth 1 trillion dollars and then in later paragraphs is says the fairtax will drive buisness underground and create a vast black market. Someone either didn't read the first part or ignored it because you can not create something that already exists. Anyway the fairtax will be audited as much as the current tax so yes there will still be a black market but it will probably not be any larger or smaller than the present one.

There is also a lot of ninny gagging about why the tax is inclusive instead of exclusive, the reason is simple it is supposed to replace and inclusive tax (income taxes) so it is inclusive. If you stated your income taxes exclusively you would be paying a much larger precentage but you would still be paying the same amount of money. It is a very moot point.

In my opinion the only idea better than the fairtax is no eliminate federal tax period, this government has so much money they don't know what to do with it. They take my money from me under penalty of the law and then they give it of Africa and other diverse charities. I will choose the charities that I want to give to. Anyway I am off topic, this article is filled with William Gale supports and William Gales only real criticism of the fairtax is that too many people like it. He is a fop who uses big words to try and confuse people and direct the ignorant masses to his line of thinking. Some of you peole should visit fairtax.org it has an answer for every criticism made by the opponents of the fairtax.

NPOV dispute tag has been on here for a while now. Are there still specific complaints? The article still needs improvement but there don't seem to be many blanket value judgments. Should we remove the tag? Rhobite 05:35, Jun 15, 2005 (UTC)

It's my opinion that any article on a current political proposal, unless simply the wording of the bill itself, is almost by definition under POV dispute at all times. The NPOV tag is there not necessarily to ask for more changes to the article, but mostly as a warning to readers to say "here are strong opposing opinions, and it's up to you to decide if this is a fair representation or not." --Unfocused 20:41, 23 Jun 2005 (UTC)

(17-June-05)Don't know very much...

Your discussion shows that you people don't know very much about the FairTax. It is a proposal developed over 10 years by economists from Harvard, MIT, Stanford, Rice and other top-flight institutions. It is a bi-partisan proposal designed to provide a progressive tax structure that REPLACES the current income tax, social security taxes, corporate taxes, etc. It funds the government at current levels. Everyone is taxed the same, and everyone receives a monthly rebate so that no one pays tax on necessities up to the poverty level, and everyone pays essentially the same for goods and services that they do now.

The FairTax would make the USA the only country in the world that doesn't tax production, thus bringing back "outsourced" jobs and pulling foreign companies to do business in America.

With 100% of their paychecks or pension checks to spend, save and invest, the American taxpayer will be free to use his money as he sees fit; and without the IRS hanging over them, churches and charities would be forever free from the threat of losing their tax exempt status.

An encyclopedia entry should simply define the term. It doesn't include argument for or against an issue -- that is for comment sections, etc. [[User talk:AmericanWriter| 4 June 2005 (UTC)

I've researched this myself, and your hostile, superior attitude isn't going to win you any friends. My degrees are in Finance, Management, and Economics, so don't assume you're speaking to the uneducated.

Your bias is self-evident in your claim that this is a bi-partisan proposal. This issue has support ONLY from Republicans. How is that "bi-partisan"?

• This is not true - There is some democratic support. Collin Paterson (Congress) and Zell Miller (Senate) both Co-Sponsored past bills. There are many others that have said they would vote for it if it got to the floor or just find it an interesting proposal and would like to see more research. I think both parties agree that our current system is not acceptable. It is a big stand for a politician to make on such a radical bill. I've also seen both sides against it. I would agree that republicans support it in much larger numbers but to say it only has support from republicans is untrue. Morphh 00:18, 14 Jun 2005 (UTC)

• Unless we have cosponsorship, or a vote, or a the very least, a statement "on the record" in support of this specific bill, a politician can say anything and mean nothing. We should restrict ourselves to verifiable support. --Unfocused 16:17, 17 Jun 2005 (UTC)

Fixed rate sales taxes are ALWAYS regressive. There is no getting around that. It's built into the definition of regressive. A limited exemption for everyone, regardless of whether by "prebate", rebate, or an immediate exemption at the point of sale, only makes the exempt portion of the tax neither regressive nor progressive because it applies equally to everyone. The balance of the fixed sales tax is ALWAYS regressive. These are indisputable facts.

This is NOT a progressive taxation proposal. It is a regressive tax proposal. By definition, all forms of fixed rate sales taxes are regressive. Progressive taxation by definition, requires the wealthier taxpayers to pay more as a percent of their income. This proposal does not tax progressively.

You have a fundamental misunderstanding about what an encyclopedia is. A DICTIONARY is for definitions, an encyclopedia examines articles in total, with differing views where appropriate for full understanding. Encyclopedias are not for one-sided propaganda pieces. Unfocused 03:57, 7 Jun 2005 (UTC)

Did you miss the part about the automatic rebates? Individuals buying final consumer goods at the poverty level pay a net zero percent of their income in taxes. Individuals spending at twice the poverty level pay about 12%, and individuals spending at many times the poverty level pay nearly 23%. Individuals spending less than the poverty level actually pay negative taxes, as a percent of their income. That's the very definition of progressivity. Scott Ritchie 07:46, 9 Jun 2005 (UTC)

First, a minor point; they're not rebates, since they're paid whether any spending occurs or not. They're entitlements, subsidies, or stipends.

Second, an entitlement paid to reduce a flat tax's burden does not create a progressive tax. It creates a progressive effective tax rate, but since the actual tax rate does not go up as the taxed behavior goes up, the tax itself is not progressive. The overall effect of this entire policy may be progressive, but to claim a flat tax with a subsidy is progressive is a misnomer, as the tax rate itself remains fixed.

Further, "on spending" is not how progressive and regressive have been used in tax policy because there hasn't been a truly progressive sales tax that I'm aware of.

I do see what you're saying, and I definitely was overly rigid in assertion. I think I overreacted to the claim that "you people don't know very much" above. My apologies.

Since this use of "progressive taxation" has not been the common use, I suggest that any use of progressive/regressive in this article should probably include whether it's truly progressive (rates change) or effectively progressive (effective rates change), and on what economic activity such progressivity acts on, since uses other than "progressive on income" are not the normal use, and that is what people automatically mentally compare to when progressive taxation is mentioned. There should be clarifying comments since this is not typically how "progressive" has been used in past tax policy.

Progressivity implies that the rate changes as the taxed behavior changes. This proposal does not change the rates at all. To claim that it's a progressive tax policy without further explanation is a gross oversimplification, and may be a little deceptive, in my opinion. Unfocused 13:26, 9 Jun 2005 (UTC)

(13-June-05) 6/7 work on 'Black Markets' & 'Tax Code Compliance' section

1. I changed the name of the section from 'Black Markets' to 'Tax Code Compliance'. There are relevant pros/cons to the proposal regarding compliance that don't fit the black market label. This was clearly the section to put those facts in, thus the name change.
2. I clarified the compare/contrast details on a VAT vs. sales tax. A lot of the content was pretty much a copy/paste from about.com. The terminology was also fairly ambiguous for anyone with a finance/economics background. I tried to clean up the terminology while maintaining accessibility for the layman reader.
3. I used indirect sourcing for the IMF and IRS facts. I've heard both of those factoids thrown around for quite a while... I found confirmation in an Economist article. It's subscribers only, but the title is "The case for flat taxes" from 4/14/05 if anyone feels the need to go to a library for a hard copy to verify. I didn't want to add a URL footnote to a page that will just say "subscribers only".
4. I also added a disclaimer about who bears the actual cost of a VAT or a sales tax. In either case, it's not necessarily all the consumer or all the producer. That depends on the economic characteristics of the market. Who writes the check for the tax amount is not necessarily the same entity as who actually feels the effect of the tax.

Feco 02:35, 8 Jun 2005 (UTC)

If you can, please post your reference to the paper version of the Economist article. Not all references need to be online. Obviously online references are easier to double check, but these aren't necessarily contentious facts, just facts that should be referenced. --Unfocused 15:41, 8 Jun 2005 (UTC)

NB- an un-linked reference to the Economist article (w/ title & publication date) is now footnoted Feco 17:00, 13 Jun 2005 (UTC)

The effects on retailers discussion doesnt address the potential for a booming under ground services economy, such as already exists in the labor market were workers are paid under the table in the contracting trades. Unscrupulous contratoers, who already may be paying workers higher wages but contributing nothing to work comp funds, unemployment and social security accounts, can raise still be competititve with compliant businesses and still rake off the fed tax. Nobs01 17:40, 11 Jun 2005 (UTC)

Personally, I expect that just as they don't collect and pay payroll taxes now, they won't collect and pay FairTax if the system is ever changed. --Unfocused 18:31, 11 Jun 2005 (UTC)

(24-June-05) Tax Collection

I have some concern with this section. While the source is quoted, I'm not sure it is true. "For taxes such as ordinary personal income taxes on wages, where there is withholding and third party reporting to the federal government, tax evasion rates are about one percent. Where there is some reporting or withholding, the rate rises to 17 percent. However, for taxes such as the FairTax proposal that are not withheld and reported by an independent third party to the government, evasion rates rise to 30 percent or more. Evasion rates of only 20 percent would require raising the sales tax rate to over 51 percent. [11]". While the citizen is not reporting anything to government, the business that collects the tax is required to do so and will be subject to audit. With only businesses reporting taxes, it is much easier to manage tax fraud. I know our state does a pretty good job with its sales tax. Does anyone know the evasion rates on State Sales tax? While the rate is considerably lower then the federal tax would have to be, it may give a much better indication of evasion and enforcement then the above figures. In addition, a majority of new goods and services are provided by a small percentage companies. (I use to have the figures on this but I can't seem to find them - I think it is 10% of companies provide 90% of goods & services). These are larger companies that would most likely not evade taxes. While I'm sure there will be evasion, I think the claim that under the Fairtax the taxes are not reported or monitored by government is false. As Unfocused so persistently claimed below, companies must pay taxes. I propose removing this statement or rewording it as to say that opponents have some concerns as to the evasion rate and maybe reference the article. Morphh 15:44, 16 Jun 2005 (UTC)

In addition, I'm not sure where he got the 1% tax evasion rate on income taxes and what falls under 17%. Even 17% seems to be a low number - I've seen old articles with much higer numbers. With less returns to audit (no more individual tax returns, only retail level businesses) and with the returns asking only the level of sales per year (as opposed to the massive size of returns for most businesses under the current system), it will be much easier to enforce compliance and detect fraud, as compliance auditors will have to look at a tiny fraction of the current pool they need to audit, and then only concentrate on one factor per audit, instead of hundreds like the current income tax system. Morphh 16:20, 16 Jun 2005 (UTC)

There is a point that is missing from the article that is important to this section. HR 25 is a National Retail Sales Tax, but it is to be administered by the States and not a Federal Agency. This has a bearing on compliance because it will be a State's own agency that monitors and audits businesses within that State. The 25 basis points paid to the States amounts to 5 billion dollars the States will have available for enforcement. As an example, California should receive over $500 million for enforcement. According to the first line of the second paragraph here http://www.lao.ca.gov/analysis_2004/general_govt/gen_09_0860_anl04.htm this is more than California is currently spending enforcing its own Sales Tax and Excise Taxes. The FairTax is simpler, but extends to cover services which are not currently subject to the California Sales Tax. Because the Federal money paid to the States for enforcement is a percentage of the total revenue collected, the States will have an incentive to maximize collections. I would expect a system of rewards to citizens similar to the IRS rewards system for reporting income tax evasion. Except it is rare for someone to know that someone else is evading income taxes. A consumer will know immediately if a retailer is not charging them the Sales Tax. Getting a reward for 10% of that year's penalties and taxes owed by a retailer is going to be worth a lot more to a consumer than the little they would save on their own purchases from that retailer. The California BOE does not currently offer rewards for information on tax evasion, but with a higher rate involved I think they would. Kellis91789 22:38, Jun 22 2005 (UTC)

I see someone trimmed my long-winded paragraph about a possible rewards system for reporting tax evasion. There is no comment here on the Talk page as to what they objected to. That is discourteous considering I waited a full day after stating my intention to add these paragraphs. I have trimmed it to a single clause about rewards similiar to what the IRS currently uses. Kellis91789 23:10, Jun 24 2005 (UTC)

(22-June-05) Marginal analysis in 'Tax Rate' section

I re-added the graf on marginal analysis, with a new disclaimer that such analysis is back-of-the-envelope. It ignores all of the details (eg, EITC and rebates), but this form of analysis is important enough to be included. It's pretty standard, especially for cross-country comparisons. Feco 02:50, 8 Jun 2005 (UTC)

The closing paragraph leaves an unequal comparison. It quotes an average income tax rate of 14.23%, also states a payroll tax rate of 7.65%, but then leaves the impression that the 14.23% income tax rate should be directly compared to the FairTax rate of 23%. I've added the correct comparison to the FairTax rate and a simplified example for a single person of middle income to show the effective rates under both Income + Payroll taxes and FairTax + Rebate. Kirk 03:20, 22 Jun 2005 (UTC)

NOTE: The previous paragraph was added by a non-logged in user with IP 65.112.161.200. User:Kirk has 11 logged in edits since 2003, none on FairTax or Talk:FairTax. To date, this IP address has a contribution history of exclusively 17 FairTax edits, and one Talk:FairTax edit.

(12-June-05) Transition effects & dbl taxation

I renamed the section to somthing that's a little less loaded. I also removed the term double taxation since it's inaccurate here. Double taxation is a tax on the same thing twice. The classic example is a tax on a corporation's income (which is owned by the shareholders anyway) then a tax on the actual distribution of that income to shareholders). The situation is this case is analagous to the gasoline tax: I use my after-tax income to pay for gasoline consumption. Money is never taxed... economic behavior is taxed. In this case, it is two different economic behaviors that are being taxed. Feco 03:03, 8 Jun 2005 (UTC)

For retirees, the purpose of building a nest egg of savings is to spend in their retirement. That money was taxed before setting it aside for future consumption, then would be taxed again when used for its original purpose. It's not like we live forever, there are cycles that everyone follows in life; double taxation in this case is merely a true statement. --Unfocused 03:52, 8 Jun 2005 (UTC)

Yes, retirees have used the term "double taxation" in their opposition to the FairTax, so we should use that term when describing their argument. Rhobite 18:26, Jun 10, 2005 (UTC)

The transition costs so far only discuss ordinary income; what about a Capital loss carry forward, unaccumaled decpreciation etc; I suspect the answer to redress for elderly savers would have to follow a line like this (particularly, for example, an elderly person who liquadates a home, then uses the proceed for nursing care). Has any of these questions been addressed by Committee Amendments? Nobs01 21:48, 10 Jun 2005 (UTC)

all kinds of terms are thrown around inaccurately in political debates. InvestorWords and Dictionary both define double taxation as the taxation of the same thing twice. I refer again to the fact that income and spending are two different economic activities. Also, savings can take many forms with many different characteristics. Contributing to a Roth is after tax. Contributing to a 401(k) can be either. Depending on structure, a pension never even shows up as income until it's being collected. I'd be happy with adding something along the lines of "opponents of the bill claim it would lead to double taxation of retirement savings. In fact, the plan represents an end to income taxation and an increase in consumption taxes. Individuals who live through the transition will have seen their income taxed before the change and their spending out of savings taxed after the transition." Feco 08:30, 12 Jun 2005 (UTC)

(25-June-05) Untaxed illicit income & taxed licit consumption

I re-added the sentance "[Illicit income] will be taxed under the FairTax plan when illicit income is spent on consumption." FairTax assesses all taxes at the point-of-sale, where consumption 'happens'. The illicit income (which is presumably unreported and untaxed) has to become consumption at some point... when it does, the consumption tax occurs. Obviously, the big caveat is the effectiveness of the consumption tax, but that's the subject of the entire article, so I think disclaiming such here would be a little cumbersome. Feco 03:11, 8 Jun 2005 (UTC)

In a nutshell, drug dealers buy cars and groceries and dine out like everyone else. There aren't many illicit business in sectors that aren't illegal or over-regulated to death. The costs of doing business illegally are huge, which is why illegal businesses tend to exist only in illegal sectors. One way or another, criminals spend most of their money in the legitimate sector of the economy. Feco 03:25, 8 Jun 2005 (UTC)

If we're going to claim that money saved is not taxed, then it stands to reason that illicit money saved will not be taxed either. Either we accept the argument everywhere in the article, or we get rid of it everywhere in the article. Therefore we cannot unequivocally claim that illegal trade will be taxed.

Further, what if a drug dealer uses all of his money from selling drugs to buy tax free business supplies to support his otherwise unprofitable business venture? Illegal transactions are not necessarily taxed under this plan. To claim otherwise is a fallacy. --Unfocused 03:41, 8 Jun 2005 (UTC)

I think we can all agree that any money saved will not be taxed no matter where it comes from but you can not tell me that a drug dealer or an illegal immigrant is never going to go to a Burger King or a Jiffy Lube. Illegal immigrants will also never see the rebate unless they want to risk deportation or an audit. The point is they still need to get toilet paper from somewhere and they may be able to get some of it on the Black Market but these people are like every other red blooded American, when they have a dollar in their hand they will go out of thier way to spend it.

But by your own logic arguing against the current system, these illegal purchases are already taxed by the hidden taxes already included in what they purchase. The only difference is whether the taxes are embedded in the price, or added on as a sales tax. I never claimed that illegal activity would not be taxed under FairTax, I'm just pointing out that illegal activity already has a tax burden built into the purchase price under the current system. Unfocused 05:22, 11 Jun 2005 (UTC)

to clarify the terminology, illegal activities bear some tax burden when the proceeds of those activities are spent in the licit economy. Illegal activities do not bear a full tax burden, b/c illegal income is not reported and taxed as income. Right now, our tax code is heavily in favor of taxing income. Not all of that passes through to implicit taxes on consumption. Under the proposal, the entire tax burden will shift to consumption. There will be no way for illegal income to avoid direct taxation, b/c there will be no direct income taxation. The spending of illegal proceeds in the licit economy will suddenly bear the full tax burden like any other licit spending.

Let's say the drug dealer earns $100 a year in cash. He spends $65 of that on consumption. The $65 is subject to current 10% sales tax (keeping it simple), so $6.50 is paid in taxes. He should've faced a 30% income tax ($30 in lost tax revenue). Had his disp. income been $70 after tax, he would've spent $45.5 on consumption (assuming constant MPC). This gives taxes paid of $4.55. Net loss to tax system is 30-(6.5-4.55) = $28.05.

Now assume the new system. Dealer earns $100 a year in cash. He spends $65 on consumption. It's taxed at 30%, so he pays $19.5 in taxes. His tax burden has risen from $6.5 to $19.5.

Hopefully, that will help convince that FairTax will increase the tax burden borne by the underground economy. Feco 08:30, 12 Jun 2005 (UTC)

Oh, I never stated that FairTax wouldn't increase the tax burden in the underground economy. If I implied that, please forgive me. I only objected to some anonymous users repeatedly claiming that the black markets weren't taxed at all now, while simultaneously claiming that there are hidden taxes in our retail prices that add up to nearly the same amount as (or more than) the proposed FairTax rate. The internal inconsistency of the argument was completely ignored.

I'm not sure if anyone's done a burden analysis under the current system and under FairTax for illegal trade, but would agree that it looks like FairTax may increase the tax burden on illegal trade. The net effect would depend on just how much business FairTax drives underground. --Unfocused 13:00, 12 Jun 2005 (UTC)

I had intended to seek some compromise language on the proposal's effect on the illicit economy. After doing a big wording/grammar tweak, my brain's a little fried right now. You're right that the net effect depends on how much of the "hardcore" illict economy becomes subject to increased taxation (through higher taxes on licit consumption) vs. how much of a new "softcore" illicit economy is created through relatively minor sales tax evasion. Feco 16:44, 12 Jun 2005 (UTC)

There is something here that bothers me, but it is a conclusion of my own, and I hesitate to modify the article. Several studies seem to show that the tax and compliance costs account for 20% - 30% of retail price of American made goods and services. That would imply retail prices have been inflated by $2T to $3T, yet the total income taxes and payroll taxes remitted by businesses is only $800B -- according to the 2004 IRS Data Book, even assuming that all income taxes "not withheld" were from small businesses. This means the unproductive losses due to compliance are between $1.2T and $2.2T, which is far in excess of the $400B - $900B that is usually reported. Still, it is clear that only a fraction of the additional price from "hidden" taxes in the price of goods is actually revenue. This is the "inefficiency" of taxes on producers. A Retail Sales Tax is considered much more efficient in that sense. So although the underground economy is absorbing some tax burden via these "hidden" taxes on its purchases, it is much smaller than the tax burden they would pay under the FairTax. I'd like to add "These hidden costs are largely wasted in compliance costs to businesses. Because only a small portion of the hidden costs is actually tax revenue to the government, by removing the compliance costs the FairTax would result in more tax revenue from the underground economy than the current system." Comments ? Kellis91789 23:38, Jun 24 2005 (UTC)

I've never heard the idea that compliance costs more than is actually collected. Please give a reference before posting something that "out there" in the article. Every suggestion of this that I've seen is including the costs of entire payroll departments in their guesstimates. I've never seen any actual research indicating what you wrote. I appreciate the consideration you're giving this (and showing me, and others) as you proceed. --Unfocused 02:48, 25 Jun 2005 (UTC)

Can anyone produce something like a pie chart comparing the growth of the sevice sector over the past 25 years as a percentage of GDP, seeing it is the service sector where most non-compliance occurs. ThanksNobs01 15:49, 17 Jun 2005 (UTC)

(12-June-05) Politics

The article handles the subject very well and straightforward. I however have developed one reservation over the two and half decades I've favored such legislation; that is the fear that without Constitutional change, we may infact end up with both Income & Consumption taxes. There is no guarantee that if a national value add sales/consumption tax (call it what you will) is made law, that the Income Tax could be reinstated in two years time after the next Congressional elections (or at some point down the road). Basically, it may even be dangerous to suggest such a radical change without demanding the repeal of the 16th Amendment. Nobs01 03:31, 8 Jun 2005 (UTC)

Call me undemocratic if you must, but I figure if we take care of the 17th, the 16th will solve itself. I'm sick of senators from my state approving Iowa corn subsidies simply b/c they may one day caucus there as presidential candidates. A state's interest has become secondary to a politican's interest... that was always expected in the House, but never the Senate. Sigh... stupid populism. Feco 16:47, 12 Jun 2005 (UTC)

(12-June-05) Consumption versus sales tax --- Why this is a SALES tax.

This proposal is a sales tax for the reasons I stated above, namely, that consumption of natural resources is not taxed. Consumption of capital is not taxed. Consumption of labor resources is not taxed. The only act that is taxed is the final sale to the end user. It is therefore a sales tax, and should be referred to as such everywhere in the article. To say that it influences consumption would be an accurate use of consumption in this article, but this is a sales tax proposal we're discussing, not a consumption tax (unlike a VAT, which IS a consumption tax). --Unfocused 04:02, 8 Jun 2005 (UTC)

VATs, retail sales taxes, and luxury taxes all fall under the broad category of consumption taxes since they are taxing acts of consumption. Income taxes, in turn, tax labor and income (interestingly, some VATs are also income taxes, if they don't exempt labor as a value add). It may be more precise to call it a sales tax, but it is still a consumption tax. Scott Ritchie 17:40, 9 Jun 2005 (UTC)

I agree with Scott Ritchie. Consumption is all non-investment spending by households. The depletion of natural resources is taxed under the system in that their depletion factors into the final price of a consumer product. Ultimately, every good and service ends up in the hands of a household. Whenever that step occurs, the sales tax is assessed and collected (who bears the economic burden is already passed along the supply chain depending on each component market's characteristics. A VAT and sales tax both do the same thing. Labor is in an entirely different market (factor market), so goods market terminology isn't always relevant. Feco 08:30, 12 Jun 2005 (UTC)

(23-June-05) Preparing for change of reference style to REF/NOTE format

There are hidden comments in the references at the bottom of the page. Please don't change them. I'm preparing to change to REF/NOTE style citations. See Caulfield Grammar School for an example of this and how it works. Thanks. --Unfocused 04:38, 8 Jun 2005 (UTC)

• My intended change in footnote style didn't work as I expected it to. I reverted my own changes before anyone else edited. I'll try again later, after I've had time to learn the various footnote styles in use here. If anyone else feels like applying a more "automatic" footnote/citations style to the article, please do!--Unfocused 06:00, 9 Jun 2005 (UTC)
  • Yes, the references do need to be fixed up here. I've never used the automatic footnoting templates but maybe I'll take a crack at it. Haven't edited this article yet but I've done a bunch of research on the subject before. Rhobite 18:32, Jun 10, 2005 (UTC)
    • I cleaned up the footnotes, unfortunately the automatic footnote system is a little clunky. You have to keep the references in order manually, and you can't cite the same thing more than once unless you create another entry. But it's better than nothing I guess. Oh yeah the last 3 or 4 references are not used in the article. If they support a specific fact they should be referenced, otherwise we should move them to a general references section. Rhobite 04:26, Jun 15, 2005 (UTC)

Good idea to move unused items to a general references section. I haven't gone through the references in detail as you have, so you're welcome to "have at it." And so you know, there are other footnote/reference styles in use here. See Wikipedia:Footnotes for more information. Hopefully, the next version of MediaWiki software will support better automatic footnoting. FYI, I've used another of the footnote styles at Pukavik. Have a look at how references and notes can be kept separate with this other system. Remember, however, that the style in use there would require manual renumbering of all following notes if a note is inserted above the last current note in the article. --Unfocused 05:07, 15 Jun 2005 (UTC)

Now that User:Rhobite has changed the references to a footnoted style, I propose that this section go into the talk page archive. Agreed? --Unfocused 20:35, 23 Jun 2005 (UTC)

(14-June-05) Progressivity in "Tax Rate" section

I cut "Beginning with the lowest marginal tax rate of a negative value, the tax a family would pay is variable with a top rate being 29.9% for the most lavish spenders" from the 'Tax Rate' section. I'm assuming the sentance refers to after-subsidy effective rates, but I'm not positive. I would like to re-word for accuracy: "The marginal tax rate on spending would be constant at 30%. After the subsidy checks are considered, families spending below the federal poverty threshold would pay an effective sales tax rate of close to zero. When a family's spending exceeds the threshold, its effective marginal sales tax rate reverts to 30%." Feco 16:10, 12 Jun 2005 (UTC)

• REPLY - This is very misleading. While the rate is flat, you couldn't actually pay 30% - maybe 29.999% Once you go above poverty level, you don't instantly jump to 30%. You would pay a 30% flat rate under or above the poverty line but what you pay in taxes for the year or month is what is important. It is truely incramental from a negative value to 29.9%. If you spend $10,000 over the poverty threshold, you may only pay a 5% tax rate for the year. The amount of spending also assumes that everything you puchase is new and you buy nothing used. Claiming a 30% tax rate is like taking the maximum income tax rate. Only Non-US citizens would pay 30%. I cut "I'm assuming the sentance refers to after-subsidy effective rates, but I'm not positive." Why would it be presented otherwise? The bill has the subsidy so why would you present the tax rate as if it didn't. Otherwise it would just be a flat sales tax, which the Fairtax is not. Morphh 14:12, 14 Jun 2005 (UTC)

I agree with Feco.

1. The subsidy payment has no spending requirement, so the actual tax rate is always 30%. The subsidy creates a variable effective tax rate, but the tax rate remains unchanged. The marginal rate on each dollar spent is always 30%.
2. Go beyond 29.9% to 29.99%, and you've exceeded the reasonably valuable significant digits of your calculation. Rounding is normal and expected. For this article, 29.99999% is the same as 30%. To say 29.9999% rather than 30% reduces the value of the article by inserting a trivial level of detail. --Unfocused 15:59, 13 Jun 2005 (UTC)

• • That doesn't even make any sense. How much will you pay in % to the Government for the year?! Not 30%!!! So why do you try and presnet it like that? The question of Tax rate should be how much of my money goes to the government. What do you mean that the subsidy has no spending requirement? It is your federal tax refund - monthly. Spend it or not, it removed your tax liabilty. Lets make this simple. Calculated inclusively for the year 2000, a family of four spending $22,500 in new goods and services would pay a tax rate of 0%, at $45,000 its 11.5%, at $90,000 its 17.2%, at $180,000 its 20%, and at $5,000,000 its 23%. [1] -- Rounding up is fine - I was just trying to show the math of the variable rate as 30% would mean you did not get any subsidy. Morphh 14:12, 14 Jun 2005 (UTC)

Morphh- take a close look at the title of the pdf link you provided. It is effective tax rates. Yes, someone's effective tax rate will asymptotally approach 30% as their consumption increases. Under the current system, everyone pays a different effective income tax rate, due to all the nuances in the tax code. Effective rates can only be calculated after the fact and are of little use for apples-to-apples comparison. That is why people in the field use marginal tax rates for simple analysis. Feco 16:53, 13 Jun 2005 (UTC)

As Unfocused pointed out above, the subsidy has no effect on spending behavior. Conceptually, George Bush will fly over in Marine1 and drop a sack of money into your backyard on January 1. That sack will fall come hell or high water, regardless of your behavior. For the rest of the year, you will face marginal sales tax rates of 30%. That is why marginal analysis is relevant. Feco 16:56, 13 Jun 2005 (UTC)

• I see what your saying and you are correct. However, most people are not "in the field" and have no idea what the marginal rate implies. If I'm just a simple guy and you tell me my marginal tax rate is 30%, I'm going to think the effective tax rate is 30%. Perhaps both should be presented along with the current income tax marginal rate. Just seems like you’re trying to spin the reality of what people will really pay. Present what people are familar with and will understand - The effective Tax rate. For it or against it, that is at least fair. Morphh 14:12, 14 Jun 2005 (UTC)

• • Presenting just a hypothetical effective tax rate is not fair, it is one sided POV. There is no definitive way to compare people's effective tax rates, since both current rates and consumer behavior vary so much. I think we'll have to accept multiple explanations for this article, because each explanation has its own political undertone to it, intentional or not. --Unfocused 17:50, 13 Jun 2005 (UTC)

Can a marginal Income tax rate be accurately compared to the Fairtax marginal rate? I believe the marginal income tax rate is somewhere around 35%. Does this include payroll taxes, corporate taxes, capital gains taxes, gift taxes and inheritance taxes as does the Faritax marginal rate? Sorry for my ignorance on this, I've only been interested in effective rates up to this point. Morphh 14:12, 14 Jun 2005 (UTC)

No. There is no single marginal income tax rate - it varies from taxpayer to taxpayer. Due to the many credits, deductions, and phase-outs built into the U.S. tax system, along with its progressive nature, general marginal tax rates are inaccurate. Rhobite 19:56, Jun 13, 2005 (UTC)

(22-June-05) "Tax Rate" section

I cut "Other estimates range up to 50% inclusive, or a 100% sales tax on each purchase at the register". I'd like to remove this statement. This is just ridiculous and makes absolutely no mathematical sense. The Americans for Fair Taxation have spent millions in research and have top economists stating their numbers and we're going to through in some off the wall quote from some nobody. One of the articles referenced is from someone advocating no tax whatsoever. I'm for fair and having both sides. I have no problem with the Congress panel review (while they have much to gain with the current system and inflating numbers). On the other side, the bill has not been recalculated since the Bush tax cuts which would bring the rate down several % points. While I believe that to be relevant, for fairness sake, I thought we should leave it out and only present what is currently in the bill.

In the article they quote tax evasion and government growth as the reason for the higher % rate. Problem here is that we are not looking at government growth - The government income will grow with increased consumption as it currently does with increased income. The plan should be revenue neutral and not let’s tack on 10% because we want to grow the government. Secondly, tax evasion is huge under the current income tax system - 20% or more. Under the Fairtax it would be much less and here is why. 10% of the companies make up 90% of the sales. These large / most likely public companies will pay their taxes. So, even if 100% of the other 10% evade taxes, we're still in a much better situation then we are in now. Morphh 00:45, 14 Jun 2005 (UTC)

I would like to see those estimates removed, mainly b/c they're from a less-credible source. Since we have an estimate from the gold standard in the field, why should there be another one listed? The Congressional JCoT is the authority for these types of estimates, even more so than the CBO. Brookings (the source of the other estimate) is significantly less credible:

1. they don't have access to the same quality of data as JCoT
2. they may have a political agenda.

Feco 16:48, 13 Jun 2005 (UTC)

You can't simply remove arguments against that you don't agree with. You should rebut them instead. As far as I can tell, the analysis that resulted in the 50%/100% rates was genuine research. Disagreeing with research that doesn't support your point of view is natural, normal, and to be expected. But you cannot simple delete that which you don't agree with. In addition, no one is required to believe that JCoT has produced the only reasonable estimate, after all, Congress is about compromise, which is sometimes disconnected from reality. If Congressional JCoT is the "gold standard", then why even accept the FairTax proposal's claim that their tax is revenue neutral? Because reasonable people can come to reasonably different conclusions, that's why. We should report all reasonable estimates. Having multiple estimate, especially those that fall on both sides of the "gold standard" increases the credibility of the article. --Unfocused 17:00, 13 Jun 2005 (UTC)

I am rebutting them here instead of deleting it. The 50%/100% doesn't even make any sense for the reasons stated above and mathematically. Let's do the math. In fiscal year 2003, the current tax system generated revenues of about $1.67 trillion. In that same year, the economy produced goods and services valued at $11 trillion. Consumption in the U.S. economy was $9.5 trillion or 86.4 % of total economic output in 2003. Can you seriously think that it would take at 100% sales tax to remain revenue neutral? It's outrageous and in normal discussion I'd laugh it off, but it is being posted in an online encyclopedia. Let’s be realistic. Unlike some other sources, the proposed rate has been independently confirmed by several different, non-partisan institutions across the country. Morphh 19:11, 13 Jun 2005 (UTC)

First, how much of that $9.5T consumption was actual retail sales? From here Retail Sales and Food Services, Total: NSA: Millions of dollars, I get a much smaller total of $3.6 trillion dollars for US retail and food services sales for 2003. This includes restaurant & food service sales. What does your number include that mine doesn't? I think you're forgetting that a lot of consumption is business related, and tax free under this plan. Also, have you deducted the exempt categories of goods from the gross numbers you cite? How much of that consumption was government spending, which would be revenue neutral under FairTax, other than slightly increased compliance costs? Even if you referenced the source for your data, described it in neutral terms, and mentioned that there are other factors that you aren't including, such as the likelihood of overall spending going down in the face of a large sales tax, it's bad form to place your own mathematical example into the article. It is "original research" and therefore not suitable for Wikipedia. (See Wikipedia:No original research) Wikipedia is, more or less, a collection of verifiable facts, combined with references to research conducted by others. If your claim is true, it should be easy to find a study to cite.

I did not intend to use that example in the article. I was just using it for this discussion. An example of what goes into the National FairTax Base can be found here. Morphh 21:22, 13 Jun 2005 (UTC)

Also don't agree with this statement at all "likelihood of overall spending going down in the face of a large sales tax". I expect the economy to just the opposite. As the bill has included businesses claiming taxes on inventory, the cost reduction of domestic goods should move pretty quick. Economics will take over as businesses compete to be the first to remove the cost of embedded taxes. People with have a full pay check. They are going to do what Americans do.. spend beyond they're means. Morphh 00:45, 14 Jun 2005 (UTC)

The alternative is rebuttal. The best rebuttal, in this case, is probably providing a more direct citation of the non-partisan institution studies that you say have confirmed the proposed rate, instead or in addition to citing through the various FairTax support web sites. If there are twenty reputable, independent research studies that come to one conclusion, and one that comes to another conclusion, having both in the article gives neutral point of view while still showing where more researchers agree. If it were fifty to one, or a hundred to one, then perhaps leaving out the minority view may be appropriate, but even then, rebuttal may still be the more effective choice. --Unfocused 20:29, 13 Jun 2005 (UTC)

How about Dale Jorgenson, Professor of Economics at Harvard University and past President fo the American Economics Association, estimated the rate to be 22.9 percent. Likewise, Jim Poterba of the Massachusetts Institute of Technology found a rate of 23.1 percent. Laurence Kotlikoff of Boston University also found a rate of 24 percent. Furthermore, reserchers at Stanford University, The Heritage Foundation, The Cato Institute, and Fiscal Associates have reached similar conclusions (found rates from 22.3 to 24 percent). The comment just seems to be way out in left field. Morphh 21:22, 13 Jun 2005 (UTC)

These references are exactly the kind of thing that should be included, with, whenever possible, direct references to the studies that generated these conclusions. Secondhand statements of support through the FairTax web pages are better than nothing at all, but direct reference to these studies would be very valuable. When I read an article about a political proposal, I want to know who are the supporters, and where the statements of support came from. Coming from the most independent of sources increases their credibility. In my own reading, however, I expect the Heritage Foundation and the Cato Institute to have biased views, so having the others is of extra value to a reader like me. I'm not saying to leave out the Heritage and Cato references, but illustrating why multiple references are preferable to individual references.

Sure, a statement like the 50%/100% rate seems like it's from left field to a fervent supporter. But it's from a reputable source, based on research and calculations that I'm believe were done in good faith, so it belongs there. However, having good references in a political article from one side of the issue does not foreclose the possibility of having good references from the other side, too!

It is not my intent to argue one side of this issue or another. It is my intent to make this the best article possible, and that includes both valid support, and valid criticism, in the most neutral language possible. Have a look at the article's history, and see what it was like immediately prior to my first edit. The article is much better now, both on the support and oppose sides, and I think it is getting better almost daily. The FairTax proposal itself isn't that important to me. --Unfocused 23:29, 13 Jun 2005 (UTC)

What is the source? I have not read this yet and would like to see research and see where they think every other review went wrong. I can only come to the conclusion that it is unreliable and completely bias. AFT doesn't have much to gain by putting out BS. It is made up by people that want to see a better system. The status quo on the other hand has many many reasons to put out whatever they can to help opponents make their point. I am in favor of the Fairtax but I'm not here to make this a bias article. On the contrary, I'm here to make sure it is not bias by opponents. Morphh 00:45, 14 Jun 2005 (UTC)

The source is cited. AFT is made up of people who have already decided that they think the FairTax proposal is a good idea, so they have everything to gain by putting out anything that brings people around to their view. There's nothing wrong with having made a decision, but then claiming to be unbiased about a political decision you clearly feel this strongly about is, in my opinion, denying your own inclinations. That would be like Rush Limbaugh or Fox News claiming that they're not pro-Bush/Cheney. But that's not the important part. The fact is, biased people in favor of a proposal usually provide the best arguments in favor of the proposal, and thats why I want people of many different views to edit each of the articles I contribute to. The only trouble comes when the supporters refuse to accept that there are other legitimate views of the issue, or legitimate disagreements about the effects of a proposed law. (For example, our President holding "Town Hall" meetings, yet prescreening out all opposing views. That's not a true unbiased discussion, it's a staged rally. Or FairTax supporters who don't accept that other studies have come to different conclusions about the effects of changing from an income tax system to a sales tax system, or the rates needed to fund the change.) There are going to be disagreements. Argument and rebuttal in neutral voice presents those disagreements and allows the reader to decide. --Unfocused 12:35, 14 Jun 2005 (UTC)

This source is the opinion of one guy that is not indorsed by the Brookings Institue. AFT members believe the Fairtax is a good idea based partly on the rates. Do you think anyone would support such a reform if the rate was 100%? No of course not. So what are you accomplishing? What is everything they have to gain? What exactly is "their view"? Perhaps, that there could be a better way to collect taxes then the current income tax. AFT is made up of volunteers supporting a tax collection system designed by the people. Why waste their time and effort on a bill that would have a rate that no one would agree to. It is much more likely that opponents have everything to gain by putting out anything that steers people away from considering tax reform that hurts their special interests. The only purpose to include such figures is to dissuade people from considering the bill. I never said I wasn't biased, I said I wasn't here to make this a biased article. There are plenty of legitimate reasons to disagree with the Fairtax and they should be included. However, this is an encyclopedia article. I don't think it should be a point / counterpoint debate. Gale Article- Rebuttal If they want all the juice, they can go to the Fairtax website. If they want all the dirt they can go to an anti-fairtax site. The article should present the meat of what the Fairtax is and some common disagreements with the POV. Morphh 14:09, 14 Jun 2005 (UTC)

Declaring one side's view as "all the juice" and the other's as "all the dirt" is inherently POV and against the policies of Wikipedia. This is not the proper way to approach a topic that you edit. As I mentioned above, (far above, in the section titled "Non-neutral Point-of-View") the only way to present a political proposal in a neutral encyclopedia is to present, as near possible, a summary of the proposal, the supporting views, the opposing views, and rebuttals of each. This almost requires a "point-counterpoint" treatment of the issue. The challenge is to use neutral language to describe each view so the reader can decide, not us. An encyclopedia looks at ALL sides of an issue in general, and the potential impact on society, not just the supporters' views. "Encyclopedic" describes a comprehensive view, broad in scope; not just a definition, and not just support. --Unfocused 14:32, 14 Jun 2005 (UTC)

Of course it would use neutral terms, such as supporting and opposing or whatever. I only used it here in the discussion as 'slang'. The term is used to state a "Rosey" picture or a Not so "Rosey" picture. Is this not what the supporting and opposing views of the topic are? Now your just being argumentative. Morphh 13:28, 15 Jun 2005 (UTC)

Morphh, remember that guys like Laurence Kotlikoff and thinktanks such as Cato aren't any more neutral than opponents of the FairTax. Kotlikoff has supported consumption-based taxation for a very long time. Their opinions are fine in the article, but they shouldn't be presented as "more neutral" or "more expert". Going back to the 50%/100% thing, I read Bartlett's National Review article as well as the actual paper by Gale [2]. Gale doesn't actually talk about a 50% inclusive rate or a 100% exclusive rate anywhere in the paper, so I don't know where Bartlett got that idea. We should look into that. Rhobite 13:31, Jun 14, 2005 (UTC)

Page 2 states his 50% / 100% conclsuion. Gale Article While the people you listed above may support consumption-based taxes and may not be considered completely unbiased. They are collaborated by others and the institutions have a reputation to uphold. Morphh 14:08, 14 Jun 2005 (UTC)

I think you're picking and choosing your sources. It's a fallacy to suggest that some sources have a reputation to uphold, so therefore their work is more trustworthy. That's fine for supporting personal opinions, but let's keep it out of the article please. The Gale paper you linked to was written in 1999. Did you read the paper I linked to? It was written in May 2005, and it makes no mention of the 50% rate. Gale now claims that a 31% inclusive / 44% exclusive rate would be required in order to remain revenue neutral. Gale still challenges the "official" AFT numbers but his new conclusion is much more reasonable. The new paper should definitely be mentioned in the article - we may not even want to bother mentioning the 50%/100% thing. Rhobite 14:14, Jun 14, 2005 (UTC)

I agree - This works for me. These estimates are within a realm of possiblity. Morphh 14:29, 14 Jun 2005 (UTC)

Again, I'll state that presenting all reasonable views and arguments and letting the reader decide who is credible, and who is not is the nearest thing to a neutral treatment any political issue can get. Cite the most reputable sources you can find, and leave it at that. That's the limitation of working at a site that insists on neutral point of view as a matter of non-negotiable policy. --Unfocused 14:32, 14 Jun 2005 (UTC)

I guess we differ on what is considered a "reasonable" view. When you have 10 groups all saying close to the same thing and you have one that is close to three times that of the next highest figure... Thats got to be over a Trillion dollars difference. Who screwed up? Well - whatever works for ya. I was trying to keep it relatively clean and centered. Writing the left, right, up, and down of it will be quite a bit of effort. I don't think any of these figures include the Bush Tax cuts. Maybe that's why AFT hasn't changed their figures. They're trying to make up for lost ground ;-) Neutral POV is a mater of perception. Even between us two - I think adding those numbers is a bias and you think it makes it neutral. Morphh 20:02, 14 Jun 2005 (UTC)

I should note that Gale's 1999 paper factors in evasion and avoidance, while the 31%/44% conclusion of his 2005 paper assumes zero evasion and avoidance. Gale notes that the AFT stats also assume no evasion and avoidance. Not being an economist I can't really tell if his calculations have also changed. Maybe we should mention both sets of numbers. Rhobite 14:41, Jun 14, 2005 (UTC)

The new Gale paper mentions a 45%/82% rate on page 890, and also references his other rate estimates calculated in the previous paper (as well as rates calculated by others) in the footnote on the same page. Gale has not withdrawn his previous estimates, he is only making further estimates with different assumptions. "Other estimates range up to 50% inclusive, or a 100% sales tax on each purchase at the register." in the article is still a statement of fact. FairTax supporters should not be permitted to define the arguments of those who are not supporters. --Unfocused 14:46, 14 Jun 2005 (UTC)

Rebate, subsidy, negative income tax, call it what you will; bascially it is an extension of the earned income tax, or at least that is how it is likely to be administered, (qualified) albeit by monthly checks. Nobs01 02:12, 15 Jun 2005 (UTC)

Actually, the word "subsidy" has a very negative connotation. "Tax Credit" is more neutral, and still more accurate than "Rebate" or "Refund" since a "Tax Credit" can be for more than you were actually charged -- a refund or rebate cannot -- and "Tax Credits" are routinely issued in advance, just as the FairTax Demogrant is. Kellis91789 21:56, 22 Jun 2005 (UTC)

(17-June-05) Elimination of deficit?

I'm reading that Dr. Gale computed in the elimination of the deficit, it is actually budget neutral not revenue neutral. Seem he did this with a few things without doing so on the income tax side. Morphh 16:27, 16 Jun 2005 (UTC)

I don't know where you're reading that; I see on page 890 of the latest Gale report, paragraph 3, first sentence "maintains the real level of revenues". Later in the same report, he shows how his calculations include an increase of the deficit with rises in consumer prices (page 892). The only "reduction" shown in this report is on 893, where he calculates that the deficit would fall equal an equal proportion to the fall in consumer prices (if FairTax supporters are right and consumer prices fall) to reflect that the assumption that the overall size of the federal government will remain the same. Where did you see anything about deficit elimination? --Unfocused 18:14, 16 Jun 2005 (UTC)

This is what I was reading: A Note on the Required Tax Rate in a National Retail Sales Tax: Preliminary Estimates for 2005-2014. Under the Calculations section. "The required tax-exclusive tax rate in an NRST can be written as t = R/(C-X-aT+D) where R is the revenue to be replaced, C is the actual tax base, X is the amount of consumption covered by the demogrant, T is federal transfers, a is the share of federal transfers that are currently untaxed, and D is the deficit."

To further expand Gales numbers... For one, I'm not sure what exactly he means by all federal taxes in the formula he quotes. The bill does not remove all federal taxes, ONLY the taxation of income (social security, Medicare, estate taxes, corporate taxes, regular income taxes, and other income taxation), not things like utilities taxation, gas taxation, etc. So right there, he very well might be making the rate sound higher by assuming the need to replace revenue from taxes that this bill won't be eliminating.

Two, he is assuming "(b) about 20 percent of that base would be eroded due to avoidance, evasion, or legislative action (i.e., loopholes)".

I addressed the evasion of taxes above under 'Tax Code Compliance' so I'm not going to retype it. Loopholes? Unlike the current system, with is dizzying maze of thousands of potential loopholes to use, All new goods & services are taxed at the same rate, no exceptions.

And, of course, his formula does nothing to include the growth in the economy that would result from removing the dead weight of compliance costs (conservative estimates report at least $225 billion per year) and also the cost of the IRS itself and reinvesting that money into economic growth.

In footnote 2, he states how AFT deflate the true size of the needed rate to be revenue neutral by including taxes collected on retail sales to and between government agencies, and that these figures do not show a true increase in government revenue as they come from government and thus can't be counted toward getting the 23% figure. Eliminating the figure "G" as he does can certainly account for several of the percentage points in difference between his figure and others. While I agree with this assumption in principle and would accept him removing the "G" from the equation, he should apply it equally to his figures in order to be consistent and remove the "G" factor from the current revenue collected under the income tax, which he did not do.

The current income tax system also taxes the incomes of federal employees and requires all federal agencies to staff massive tax compliance & payroll departments just like any business? Government collecting income taxes (don't forget to include the half of the payroll taxes paid by Government) off of their employees is like the right hand paying the left hand. Yet, this money is counted as "revenue" under the current federal income system, so why shouldn't it in turn be able to count government payments of sales taxes as revenue under the FairTax system as well?

Please forgive me if this is not the place to post this. It is in debate of the information presented in the article. At what point to do you say that this is not presenting Apples to Apples and that Gale is just vandalizing. Morphh 19:03, 16 Jun 2005 (UTC)

Also note that the information above is for the 37.8/60.7 rate and not the 50/100. Morphh 12:34, 17 Jun 2005 (UTC)

Perhaps the concept of Dynamic scoring [3] needs to be written into the article. Or at least on article on Dynamic scoring. Se also CATO Institute [4] Nobs01 15:27, 17 Jun 2005 (UTC)

Plug the numbers into the formula Gale provided, and you'll see that the deficit is not being eliminated. Reduce the deficit, and the rate goes up even further. Increase the deficit to a bazillion dollars, and the required tax rate falls to nearly nothing. This is exactly what we should expect to happen. Gale is holding the deficit steady year after year. Further, if you look at the Gale paper that this brief is based on, you'll see that he has made his calculations more than once; including the deficit, but also again including the deficit under the best case assumptions of price reductions from AFT. He's included your best case assumptions!

All federal taxes? If you follow the reference he provides, for his own 1999 paper, you'll see that he's addressing the FairTax proposal in specific, and those taxes that it replaces. Further, the taxes that the FairTax proposes to replace represent over 97% of the federal revenue sources, not including new debt issues. This reference is a little old (FY 2000), but the proportions don't change much.

Regarding your complaints regarding loopholes & compliance, it's already addressed. Look in the latest Gale paper, and he's done the calculations multiple times, assuming full compliance, 10% non-compliance, and 20% non-compliance. This is in spite of the fact that non-withheld, self-reported taxes have the worst compliance rates, and that is what the FairTax proposal is. My own readings would suggest that 20% is a conservative estimate of non-compliance rates, but even so, lower rates are already included in Gale's calculations.

Growth & dead weight? Growth in the used goods industry and black markets is most likely. However, given that you're considering replacing a tax system that currently relies mostly on third party reporting and withholding with one that is self-withholding and self-reporting, and replacing a system where return checks are generated once a year with one that requires subsidy checks to be mailed every month, or twelve times as much, don't you think you'll need a hell of a lot of auditors and bureaucrats to catch tax underreporting and keep the monthly payments going to the right people in the right amounts?

Removal of "G"; Government employees pay income taxes out of their own pockets, just like anyone else. This is NOT the right hand paying the left hand. Also, consider that many government employees aren't covered by Social Security and Medicare (many Federal employees who started prior to 1984, I think.) and further, the government half of SSI and Medicare that it does pay is relatively small. As a fraction of the current government revenue stream, it's pretty trivial.

Re: "requires all federal agencies to staff massive tax compliance & payroll departments just like any business". Federal agencies are going to have payroll departments regardless of what type of tax system is used. There are no "massive tax compliance departments" in federal government agencies. There certainly are accounting departments, and they "pay" some taxes between government agencies through a budget item posting, but accounting departments would be necessary anyway. And regarding payroll taxes for any organization, once you set up the systems properly, you're done until the tax law changes, or until you have to enter an employee change of some kind.

The point at which I would say anyone is vandalizing an article is when they don't make a sincere attempt to explain or justify their changes to an article. Gale hasn't made any changes to this article as far as I know, so he couldn't possibly be vandalizing it. Legitimate disagreement with supporters will never be "vandalism" if reputable sources are cited.

What Gale has done, and in some ways, better than what I've seen from FairTax supporters so far, is explain how he came to his required rate estimates for replacing most Federal revenues with a sales tax. Perhaps you can point me to the formulas used by FairTax supporters that shows how they came to a 30% sales tax rate. I'm sure they exist.

However, remember it is NOT our duty to decide who is right or wrong. It's our duty to present all reasonable points of view in neutral language, referenced, and cited, and let the readers decide. If you have a problem with a particular reference, I think that this IS the correct place to review and discuss it. --Unfocused 15:29, 17 Jun 2005 (UTC)

(15-June-05) Current effective tax rate

I was curious about the lack of a citation for the statement that "when including payroll taxes, most people have federal tax withholdings in excess of 23%." This statement turns out to be false. According to IRS stats, the average federal income tax rate (total individual tax / total individual AGI) in 2001 was 14.23%. Even when adding in FICA of 7.65%, you get 21.88% - less than 23%. In 2001 more than 50% of taxpayers paid less than a 23% average tax rate. BTW I changed this from "withholdings" to "tax liability", since the actual tax liability is a much more useful number. The withholding process is inaccurate and people often overpay, and you get the refund back anyway. Rhobite 21:16, Jun 14, 2005 (UTC)

Good find - However it still does not show the true tax burden for that group. It does not take into account the other 7.5% payroll tax, corporate tax, or compliance cost built into the cost of every good and service. The system is designed to hide the taxes. I think stating that most are paying less then that figure is a illusion. The comment was to show that most are already paying what is considered the Maximum tax burden under the Fairtax. Again - this is all dependent on the AFT 23% numbers. ;-) Morphh 21:30, 14 Jun 2005 (UTC)

Payroll taxes are (overly simplified) 7.65%, not 7.5%. That's 6.2% Social Security and 1.45% Medicare. Corporate taxes are irrelevant because salary is a deductible expense on corporate income tax returns. AFT alleges that there are hidden taxes in the system, but that doesn't matter to this discussion either. The fact remains that on average, people pay less than 23% of AGI in taxes, even after you add in the 7.65% payroll tax. Rhobite 22:39, Jun 14, 2005 (UTC)

7.65% by the employee and 7.65% by the company. Corporations don't pay taxes, people do. Dr. Dale Jorgenson, highly regarded economist of Harvard Univ., has found that 20 to 35 percent of U.S. goods and services are "embedded" taxes. How is this not relevant to how much people pay? Just because it is hidden doesn't mean the tax burden is not there. Let's take just one quarter of the lowest number added to the 21.88% and you have more then exceeded the 23%. How about I just label it "when including payroll taxes, most people have federal tax withholdings in excess of 20%." and cite the IRS (the masters of deception). Or we could put it back to "many" as Unfocused modified. I just figured it was a misunderstanding and not debated - My bad. It is difficult for some people think past income taxes when looking at the Fairtax. They often try to compare their income tax to the Fairtax and that is an unfair comparison. The point was to try and show this when looking at tax rates. Suggestions? Morphh 00:52, 15 Jun 2005 (UTC)

Your statement that "corporations don't pay taxes" completely ignores the laws of incorporation. Legally incorporated businesses have rights similar to individuals under the law. Corporations have legal rights normally reserved for individuals. The very root of the word "corporation" is corpus, or body. From dictionary.com, "A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members."

Incorporation is the creation of a separate legal body. This is a fundamental principal of our corporate economy, and explains why corporations are taxed in the first place. (A corporate economy is any one which allows the formation of corporations as separate legal entities.) A corporation is, in effect, a virtual citizen, complete with rights. With rights and priviledges comes the obligation to pay a fair share of the society's overhead costs; therefore, corporate taxes are billed and paid. --Unfocused 01:23, 15 Jun 2005 (UTC)

Come on!! This is simple economics! Corporations don't pay taxes. They merely collect them. The actual cost of whatever taxes a corporation collects is passed along to others in some combination of lower dividends or profits for shareholders, higher prices for consumers, or lower wages and benefits for employees. It's not like they have a little bucket of money label taxes. Taxes are an expense and like any expense it must be paid by income. Morphh 01:48, 15 Jun 2005 (UTC)

Corporations merely collect taxes? Oh, then they don't earn income, either, they merely collect it? Corporations currently pay taxes. That is the law of the land. How is a corporation expensing their taxes any different than me expensing them in the household budget? Taxes reduce my income, too. They lower the dividends from my investments and profits from my efforts that I pay into my savings account or reinvest. It's not like households have a little bucket of money labelled "taxes" either. Corporations purchasing from other corporations pass along tax costs as well. Where is the tax coming from in that scenario? I pass along my tax expenses to my employer in the form of demanding a higher wage. How is that any different? How is a corporate check to the IRS any different than my personal check to the IRS? --Unfocused 03:19, 15 Jun 2005 (UTC)

"Corporations don't pay taxes any more than buildings do.", Milton Friedman Nobs01 01:55, 15 Jun 2005 (UTC)

So there's a corporate apologist refusing to acknowledge current law. Outrageous and demonstrably false statements like that are an easy way to get really famous, once you've reached a certain level of fame, especially if you know there's a hungry constituency waiting to hear such things. (See Rush Limbaugh and/or Al Franken.) I don't have a problem with such things, except when someone quotes them as if they're fact. --Unfocused 03:19, 15 Jun 2005 (UTC)

I haven't met a rock or a dog that owns corporate stock yet. Seems shareholders are all people. And many, many, are 80 year old female widows, not "the rich". Or perhaps those elderly women would be better off sucking the public teat rather than being employers of people, providing goods and services, and paying taxes.Nobs01 05:43, 15 Jun 2005 (UTC)

And exactly what does this have to do with the fact that corporations pay taxes to the IRS? Corporations are legally independent from their shareholders. That's why the shareholders aren't liable for asbestos lawsuits, for example. Corporations pay taxes. I know, because I write checks from a corporate checkbook to the IRS. Who pays the fines if the taxes aren't paid? NOT the shareholders, the corporation does. If there isn't enough money in the corporation for the tax liability, do the shareholders pay then? NO. The corporation is legally independent from its shareholders; the shareholders are not liable. Even if the corporation is liquidated for tax delinquency and has a remaining tax debt after the sale of all assets, the shareholders are not liable unless criminal intent to defraud the IRS can be proven. --Unfocused 06:42, 15 Jun 2005 (UTC)

Your comparing the physical with the effect. Of course the company physicly pays the tax, but the effect is the money indirectly comes from the customer, employee, or decreased profits to shareholders. This burden is absorbed by the people as hidden taxes. I'll try to find some good research on the topic. Morphh 13:14, 15 Jun 2005 (UTC)

You're missing the point: legal independence of corporations. Every legally independent entity has individual rights, and therefore is liable for independent tax assessment. You're confusing corporations with partnerships. Corporate taxes aren't "hidden", they're just not as simplistic as individual or partnership taxes. You can trace money "indirectly" to virtually anywhere you want; that's management accounting's job of applying burdens and reporting in ways that serve the one requesting the reports, usually management. But in financial accounting, that is, accounting used in official records, the accounting of legal record, the accounting reported to the public as company results, the taxes are paid by the corporation. Confusing the two is easy, but leads to nothing but wrong conclusions. --Unfocused 13:34, 15 Jun 2005 (UTC)

Both you guys are right, the corporation is a separate entity, and its tax burden affects its owners and the costs to patrons from whom it derives its revenue. My point is, politically speaking, its to easy to inflame the public with passing the burden of government costs onto a faceless corporation, that appears nebulous with deep pockets. This encourages government overspending cause few people really see the direct impact on living standards, be it employees of the corporation, the consuming public, and even some idiot owners. Its always just to easy to beat up on a corporation (cause after all, they are in the business of raping the public, never mind the goods & services they produce, or the jobs, or the income to widows). Nobs01 17:51, 15 Jun 2005 (UTC)

We're getting off topic here. In my comment above, I just wanted to make sure that we didn't re-add the statement that most people pay over 23% in taxes. When I said that corporate taxes are irrelevant, I was referring to the fact that salary is deductible: corporations don't pay tax on income if they pass it on to their employees. There is no "double taxation" or "hidden tax". It's true that employers must pick up another 7.65% (exclusive) in payroll taxes. Some people view this as an expense to the employee. But it's not our job to deliberate about which taxes should be attributed to individuals, corporations, etc. Determining the incidence of a tax is subjective, as you can see from this discussion. Once we move past direct taxes and talk about who bears the "true" burden of a tax, it's original research. For example, who bears the incidence of the corporate income tax? Is it the customers? The shareholders? The employees? It's not a simple question, it requires complex economic analysis. This is a debate we need to describe, not one we should play out here on this talk page. Thanks. Rhobite 04:07, Jun 15, 2005 (UTC)

(22-June-05) Section defining and explaining "Hidden taxes"?

Perhaps an entirely new section should be added that explains the concept of "embedded" or "hidden" taxes in goods and services. The easiest way to see the difference of opinion above is to ask what would happen to Prices if the businesses in the supply chain did not have to pay payroll taxes and income taxes on profits. That way it is easy to see that Prices = Materials + Wages + Taxes + Overhead + Profit. Reducing one of these components without increasing another yields a lower price. A central argument of FairTax supporters is that Taxes will be reduced at each stage of production and all other components will stay the same. Factually, that is one possibility. The alternative possibility is that Profit and/or Wages could increase as Taxes are decreased. What is incorrect is to say (as Gale does) that Price pre-Sales Tax fall only if BOTH Wages and Tax costs to the business fall. (This gives an incorrect result because lower Wages would mean lower consumption.) With either option, the consumer comes out ahead -- either Prices have fallen or Income has increased. FairTax proponents assume the fall in Prices rather than an increase in Wages or Profits. They apply this drop in Prices to the Materials and Overhead components, and get even lower Prices at the consumer level. This is applied recursively through however many levels exist in the supply chain for any good or service.

To call these costs components a "tax" to the consumer is a broad definition of a the term "Tax". Similar to how people refer to "inflation" as a "tax" on the consumer. This broader definition could be framed as Tax = Price Paid - Value Received. "Value Received" is defined as the cost of the item in a world without taxes. In this sense, any component of a Price that does not contribute to the Value of the good or service is a "Tax". That it is not labeled as a tax shown in the Price tag makes it an "embedded" and "hidden" tax. To leave this concept out of the explanation of the FairTax means there can be no direct comparison of tax rates between the current system and the proposed FairTax system. Kellis91789 20:07, Jun 22, 2005 (UTC)

The explanation of what FairTax supporters call "hidden taxes" could be an appropriate section, if sourced and referenced properly, not original research, and clearly labeled as opinion of supporters. The reasoning behind a bill is an encyclopedic element of it. If included, it should be kept as brief and simple. Some AFT support sites go on for pages on a concept that would be best explained in a paragraph or two. Unless there's a lot to the concept that I don't already know, it would have to be pretty short to remain NPOV. First, it's a relatively simple view. Second, it has an element of self-explanation in it. Unfocused 19:55, 22 Jun 2005 (UTC)

I agree it should be a simple concept. I didn't realize there was anything controversial about the components of Price, or that it was something specific to FairTax supporters. I thought the only controversy was over who bore the "burden" of taxes as a cost component. Holding all other variables constant, wouldn't taxes necessary affect Price ? If this equation for Price cannot be accepted as unbiased, then the concept of "embedded" tax even at the retail level fails. And that shouldn't even be the difficult concept. Usually the tough part is that people have no idea how many layers there are to a supply chain and therefor don't see the compounding effect of a small reduction in cost at each level.

BTW, if a reference is tossed out as "biased" because they have come to a conclusion with regard to any tax system, then you won't end up with any references. The references used so far from Gale and the JCT are clearly biased, yet have been accepted here. Kellis91789 21:37, Jun 22, 2005 (UTC)

it's practically impossible to do a technical analysis of implicit taxes under the current system against the FairTax sales tax. Who bears the burden of any tax depends on the market's structure, so it's not a safe assumption to say that final good prices will fall if the current tax regime ends. On the other hand, it's not possible to say who will bear the economic burden of the new sales tax under the FairTax regime. Feco 22:56, 22 Jun 2005 (UTC)

(23-June-05) Criteria for including references

I am not saying that biased references don't belong. They can belong. But all references need to be reviewed for what I'll call "confidence"; that is, what combination of research, editorial, speculation, and advocacy they are. The farther they are to the right of that scale, the less they belong, or at least the less prominently they should be featured in the article. Then the sources need to be identified clearly, and openly disclosed. An example is the claim as fact that interest rates would go down as a result of FairTax, without any supporting documentation. The only references where I've found these claims are speculation by advocacy groups. I don't want to add advocate speculation to an article, it's hardly NPOV. The Gale articles are excellent examples of research, and he's even given his formulas so you can repeat his work. The Congressional report is primarily research, too. All research requires some assumptions to be made. Think there is still bias? Find an appropriate rebuttal and cite it, preferably based on approximately the same level of confidence or better. Lower confidence levels can be rebuttals for higher ones, but they usually don't match up as well, so are unlikely to fit in the article as well. --Unfocused 20:26, 23 Jun 2005 (UTC)